GAO

United States General Accounting Office

Report to Congressional Committees

November 2000 DEFENSE

INVENTORY

Implementation Plans

to Enhance Control

Over Shipped Items

Can Be Improved

GAO-01-30

Page 1 GAO-01-30 Defense Inventory

Contents

Letter 3

Appendixes Appendix I: Status of DOD's Actions Regarding

Secondary Items 22

Appendix II: Comments From the Department of Defense 33

Appendix III: GAO Contacts and Staff Acknowledgments 37

Related GAO Products 38
Page 2 GAO-01-30 Defense Inventory
Page 3 GAO-01-30 Defense Inventory

United States General Accounting Office

Washington, D.C. 20548 Letr

November 15, 2000

Congressional Committees

The Department of Defense annually ships inventory with a reported value

of billions of dollars to various locations around the world. For years, the

Department has had difficulty tracking this inventory from origin to

destination. Concerns about the vulnerability of these shipments to fraud,

waste, and abuse led the Congress to enact section 349 of the Strom

Thurmond National Defense Authorization Act for Fiscal Year 1999

(P.L. 105-261), which required the Department of Defense to develop a

comprehensive plan for controlling inventory while it is being shipped. The

Under Secretary of Defense for Acquisition and Technology submitted the

Department's plan to the Congress on September 14, 1999. The statute also

required that our office review the plan and provide to the Congress any

comments we considered appropriate. In response to that requirement, we

sent you a report on February 22, 2000.1 In that report we recommended

that the Department of Defense improve the plan by modifying it to include

(1) key management elements for monitoring implementation and

measuring progress and (2) specific actions to address underlying

weaknesses in the controls over inventory being shipped.

Section 349 also requires our office to monitor the implementation of the

plan and to report within 1 year after the Department submitted its plan to

the Congress on the extent to which the plan has been implemented. This

report is in response to that requirement.

In response to section 349, the Office of the Secretary of Defense directed

the four military services, the Defense Logistics Agency, and the U.S.

Transportation Command to develop detailed implementation plans for

implementing the 18 corrective actions identified in the Department's

September 1999 plan. As of June 30, 2000, all six implementation plans had

been drafted and submitted to the Office of the Secretary of Defense for

review.

As agreed with your offices, we reviewed the six draft implementation

plans to determine (1) the extent to which they addressed the

recommendations in our February 22, 2000, report and (2) the status of the

1 Defense Inventory: Plan to Improve Management of Shipped Inventory Should Be

Strengthened (GAO/NSIAD-00-39, Feb. 22, 2000).
Page 4 GAO-01-30 Defense Inventory

18 proposed actions listed in the Department's plan to improve its control

over inventory shipments. We will continue to monitor and report on the

development and implementation of these plans.

Results in Brief The six draft implementation plans have significantly improved upon the

Department's original plan and contain features that are generally

responsive to the recommendations in our February 22, 2000, report.

However, these plans are inconsistent in content and specificity and do not

reflect a coordinated, Defense-wide approach to correcting the lack of

visibility over inventory being shipped. For example, the Navy's plan

provides a comprehensive discussion of the planned corrective actions

while the Air Force plan states that the Air Force will further study the

weaknesses and identify corrective actions at a later date. Because many of

these actions will not be completed in the near future, it is not clear

whether the Department’s proposed actions will effectively address all the

deficiencies identified in our February 2000 report. In addition, these draft

plans lack detailed performance measures for monitoring progress and

determining the effectiveness of the actions after they are implemented.

Further, these draft implementation plans do not address how the

Department will ensure appropriate coordination among the military

services and Defense commands in the implementation of the corrective

actions or how the Department will monitor future progress. Lastly, the

Office of the Secretary of Defense has begun reviewing these draft

implementation plans, but has not established a date for when the plans

should be finalized.

The Department's plan submitted to the Congress in September 1999

contained 18 proposed actions to correct the lack of visibility over shipped

inventory. Originally, 7 of the 18 proposed actions were to be completed by

June 2000, and the remaining 11 proposed actions had no specified

completion date or were scheduled to be complete between fiscal year

2001 and 2006. While some progress has been made for the seven actions

scheduled to be complete by June 2000, the Department has experienced

delays and some milestones have slipped. As of June 2000, the Department

had completed only one of these seven actions. The milestones for the

remaining 11 actions have also slipped, and some of the revised milestones

may slip even more as the implementation continues. For example, one of

the primary Defense-wide information systems being developed to better

control shipped inventory has been delayed due to funding shortfalls and

delays in development.
Page 5 GAO-01-30 Defense Inventory

We are recommending that the Department of Defense take several actions

to improve the quality of the draft implementation plans. In its written

comments on a draft of this report, the Department agreed with the

underlying message of the report that visibility over items being shipped

must be improved. The Department agreed with our recommendation to

include coordination procedures in the implementation plans, and

generally agreed with the remaining three recommendations. Based on the

Department's comments, we modified two of those recommendations to

reflect the Department's points that the military services and commands—

not the Office of the Secretary of Defense—should finalize the draft

implementation plans and measure the effectiveness of corrective actions

taken. The Department disagreed with part of one of our

recommendations, commenting that it is not feasible for it to develop a

Defense-wide plan for monitoring the implementation of the six plans. We

disagree and believe that such a Defense-wide plan is feasible and

necessary to ensure consistent implementation throughout the

Department. Such a plan should contain a formalized management

framework outlining how the Department will oversee the completion of

the individual plans and monitor their implementation.

Background The Department of Defense's (DOD) inventory includes end items and

secondary items. End items are major equipment items such as ships,

tanks, and aircraft. Secondary items include spare parts, clothing, medical

supplies, and other such items to support DOD operating forces worldwide.

Inventory being transported between two locations typically involves the

following types of material:

• Warehoused material: inventory redistributed between storage

activities, items needing repair that are shipped from consolidation

points to a commercial or other military repair facility, and inventory

returned from a commercial or other military repair facility or an end

user.

• Purchased material: new inventory shipped from a commercial source

to a storage activity.

• End-user material: inventory ordered from a storage activity or

commercial source by a unit that expects to use it.

Since 1990, our office has considered DOD inventory management a

high-risk area because its inventory management systems and procedures

are ineffective. The lack of control2 over inventory shipments and the

resulting vulnerability of inventory to undetected loss and theft have been
Page 6 GAO-01-30 Defense Inventory

major areas of concern. The lack of adequate controls over inventory

shipments could substantially increase the risk that millions of dollars will

be spent unnecessarily for new procurement. For example, we reported in

June 2000 that our analysis of available logistics and accounting records

indicated that the Army could not account for about $900 million in shipped

inventory in fiscal year 1998.3 In March 1999, we reported that the Navy was

unable to account for over $3 billion in inventory shipments during fiscal

years 1996 through 1998.4

Because DOD had not fully corrected internal control weaknesses

regarding shipped inventory, section 349 of the Strom Thurmond National

Defense Authorization Act for Fiscal Year 1999 required DOD to submit a

comprehensive plan to the Congress addressing how it will ensure visibility

over shipments of all end items and secondary items. The statute requires

that the plan address (1) the specific mechanisms to be used to enable DOD

to identify at any time the quantity and location of all end items and (2) the

following three specific concerns regarding the management of secondary

items:

• vulnerability of in-transit secondary items to loss through fraud, waste,

and abuse;

• loss of oversight of in-transit secondary items, including any loss of

oversight when items are being transported by commercial carriers; and

• loss of accountability for in-transit secondary items due to a delay of

delivery of the items or a lack of notification of a delivery of items.

We reported in February 2000 that DOD's September 1999 plan lacked

some key management elements necessary for achieving effective

implementation or for appropriate congressional oversight. Specifically, we

reported that the plan lacked detail in defining

• specific actions that include steps for achieving goals needed to address

underlying problems in controls over shipped inventories;

2 DOD uses the term “visibility” to describe its ability to track the identity, status, and

location of items being shipped from one location to another.

3 Defense Inventory: Army Needs to Strengthen and Follow Procedures to Control Shipped

Items (GAO/NSIAD-00-109, June 23, 2000).

4 Defense Inventory: Navy's Procedures for Controlling In-Transit Items Are Not Being

Followed (GAO/NSIAD-99-61, Mar. 31, 1999).
Page 7 GAO-01-30 Defense Inventory

• results-oriented objectives that are directly linked to the actions;

• performance measures that include clearly stated performance targets,

information on the use of baseline data, and benchmarks (i.e., interim

measures) for monitoring progress;

• specific schedules that include completion dates and interim milestones

for actions that are long term;

• accountability within DOD and the military services for implementing

actions; and

• resources required, including an estimated annual cost, for

implementing each action.

In its comments to that report, the Department stated that it would prepare

detailed implementation plans that would include the information we

recommended.

As of June 2000, the four military services, the Defense Logistics Agency,

and the U.S. Transportation Command had drafted individual

implementation plans and submitted them to the Office of the Secretary of

Defense for review. The Department, however, has not established a date

for finalizing the six plans.

Opportunities Exist to

Improve the Draft

Implementation Plans

In reviewing the six draft implementation plans concurrently with the

Office of the Secretary of Defense, we found that they are a significant

improvement over DOD's original September 1999 plan and provide more

specific actions, objectives, performance measures, and milestones as well

as a more complete description of the accountability for implementing the

actions and the resources required. However, these plans contain several

weaknesses that could limit their effectiveness. Specifically, the six draft

implementation plans are not consistent with each other in terms of

content and some of the plans are more thorough in defining the specific

corrective actions. In addition, the plans do not address how the services

and commands will coordinate with each other on implementing

Defense-wide initiatives. Further, while performance measures have

improved, the plans still lack detailed performance measures for

monitoring progress and verifying the effectiveness of the corrective

actions. Some of the plans lack specific corrective actions and simply state

that the service or command will further study the issues and will identify

corrective actions at an unspecified later date. In fact, many of the actions

identified in the plans are scheduled for completion several years from

now. For example, these plans provide an estimated completion date of

fiscal year 2005 for bringing management information systems into
Page 8 GAO-01-30 Defense Inventory

compliance with the Chief Financial Officers Act. Because many of these

actions will not be completed in the near future, it is unclear whether

DOD's long-term proposed actions will effectively address all the

deficiencies identified in our February 2000 report, including the necessary

steps to ensure that effective data sharing will take place among DOD's

various functional areas and correct the existing errors in systems relied on

to manage inventory shipments. Table 1 identifies the extent to which the

six implementation plans address each of the key management elements

discussed in our February 2000 report.

Table 1: GAO Analysis of Key Management Elements Included in the Implementation Plans

a

Some specific corrective actions are included in the Air Force draft plan. Other corrective actions will

be identified at a later date based on the results of a series of ongoing reviews by the Air Force Audit

Agency.

b

Although all six draft plans provide performance measures, these performance measures could be

more specific to ensure effective implementation.

Source: GAO analysis.

The sections below provide our observations regarding each of the six draft

implementation plans.

Implementation

plan

Specific

actions

included

Resultsoriented

objectives

included

Performance

measures

included

Schedules

and

milestones

included

Accountability for

implementation

defined

Resources and

annual cost

estimates

identified

Navy Yes Yes Partiallyb Yes Yes Yes

Army Yes Yes Partiallyb Yes Yes Yes

Marine Corps Yes Yes Partiallyb Yes Yes Yes

Air Force Partiallya Yes Partiallyb Yes Yes Yes

Defense Logistics

Agency

Yes Yes Partiallyb Yes Yes Yes

U.S. Transportation

Command

Yes Yes Partiallyb Yes Yes Yes
Page 9 GAO-01-30 Defense Inventory

Navy Draft Implementation

Plan Lacks Detailed

Performance Measures

The Navy's draft implementation plan is the most comprehensive of the six

draft plans. Because the Navy has been working to address the deficiencies

identified in our March 1999 report,5 it has had a better awareness of the

weaknesses in managing items being shipped and more time to address

these weaknesses than the other services, the Defense Logistics Agency, or

the U.S. Transportation Command. The Navy's draft plan includes a

detailed description of the specific corrective actions to be taken, Navy

commands and offices responsible for the actions, milestones for

completing the actions, and resources required to implement the actions.

However, the Navy's plan lacks detailed performance measures in some

cases to identify how improvements will be measured and monitored to

verify the effectiveness of the corrective actions. For example, the

performance measure for one of the Navy's initiatives to upgrade a system

used to track naval aviation support equipment is to attain 100 percent

visibility over the assets reflected in the system. This performance

measure, however, does not identify how the Navy will measure the level of

visibility it has over these items or verify the level of visibility this system

provides.

Army Draft Implementation

Plan Lacks Specific

Performance Measures

The Army's draft implementation plan contains specific actions for

correcting its lack of control over shipped inventory and defines the offices

responsible for completing the actions as well as completion milestones.

However, the plan lacks specific performance measures to identify how the

Army will measure progress or determine whether the actions, after they

have been implemented, have corrected the lack of visibility over items

being shipped. For example, one planned action in the Army's draft plan is

for the Army to adopt the Navy's Commercial Asset Visibility II Program6 to

account for and track shipments of material to and from commercial repair

facilities. The performance measure contained in the plan related to this

action only identifies the purpose of this system. A more useful,

results-oriented performance measure, however, would indicate how the

Army would measure the success of this program after the system is

available for use at Army facilities. Also, the plan does not identify how the

Army will coordinate with the U.S. Transportation Command and the other

5 Defense Inventory: Navy's Procedures for Controlling In-Transit Items Are Not Being

Followed (GAO/NSIAD-99-61, Mar. 31, 1999).

6 The Commercial Asset Visibility System II was originally developed by the Navy to manage

and report the status of repaired material at commercial activities.
Page 10 GAO-01-30 Defense Inventory

services in the development of a new DOD-wide transportation control

system called the Transportation Coordinator Automated Information for

Movement System II. The Army is the lead agency on developing this

system but is relying heavily on the U.S. Transportation Command for the

initial work on standards and specifications. The implementation of this

system will require extensive coordination among the services and the U.S.

Transportation Command. The Army indicated in its implementation plan

that the fielding of this system will be delayed because of funding shortfalls

and problems identified during development.

Marine Corps Draft

Implementation Plan Lacks

Measures for Monitoring

Progress

The Marine Corps' draft implementation plan lacks detail regarding how

the Marine Corps intends to monitor the progress and determine the

effectiveness of its actions. For example, the Marine Corp plan includes

three actions to improve the visibility over end items in shipment. These

actions, which the Marine Corps expects to complete by September 2005,

relate to the incremental fielding of a new management information system

throughout the Marine Corps. The plan, however, does not identify how the

Marine Corps will assess the effectiveness of this system or the interim

steps the Marine Corps will follow to ensure that the fielding of this system

remains on schedule.

Air Force Draft

Implementation Plan Lacks

Specific Corrective Actions

While the Air Force draft implementation plan contains a few specific

planned actions, the primary action it has instituted is to task the Air Force

Audit Agency to conduct a thorough review of its control over shipped

inventory at all supply levels throughout the Air Force. Air Force officials

said that the Air Force plans to use the results of these reviews to more

specifically define the corrective actions needed, milestones for

completing these actions, the appropriate performance measures for

monitoring progress, and the required resources. According to these

officials, until the Air Force Audit Agency completes its reviews, they are

unable to define the specific actions needed. Air Force Audit Agency

officials stated that they plan to complete their reviews by December 2001.

In the interim, the Air Force plans to continue the upgrade and replacement

of some of its major inventory information systems and to bring their

financial management information systems into full compliance with the

Chief Financial Officers Act by September 2003 with quarterly updates to

the Air Force Comptroller.
Page 11 GAO-01-30 Defense Inventory

Defense Logistics Agency

Draft Implementation Plan

Lacks Procedures for

Measuring Effectiveness

While the Defense Logistics Agency's draft implementation plan identifies

specific actions and milestones, it does not define the performance

measures it will use to assess the effectiveness of its corrective actions

over time. Because this agency is the Defense-wide command responsible

for the distribution and storage of DOD's secondary items, its customers

are the military services. As a result, the effectiveness of its actions will

depend largely on how well they serve the needs of the services and how

well they are implemented by the services. Consequently, the Defense

Logistics Agency will need to coordinate closely with the services to

determine the effectiveness of its actions. Its plan, however, does not

address this coordination process or identify how the agency intends to

work with the services to implement its planned actions.

U.S. Transportation

Command Draft

Implementation Plan Lacks

Adequate Performance

Measures

The U.S. Transportation Command has begun a number of significant

initiatives to improve the visibility over inventory while it is in the Defense

transportation network, but its draft implementation plan lacks adequate

results-oriented performance measures to monitor progress or to assess

the effectiveness of the planned actions. For example, one planned action

is to complete a direct vendor delivery pilot with a DOD pharmaceutical

vendor. The stated performance measure for this action is “successful

fielding of the various prototypes as scheduled.” This performance

measure, however, does not define “successful” or identify how the U.S.

Transportation Command will measure the success of this action. In

addition, similar to the Defense Logistics Agency's draft implementation

plan, the U.S. Transportation Command's plan will require extensive

coordination between it and the military services. The U.S. Transportation

Command's plan, however, does not include a formalized coordination

process. The success of the U.S. Transportation Command's initiatives will

depend largely on the services' implementation.

Office of the Secretary of

Defense Has Not Specified

Procedures for Review and

Oversight

Officials in the Office of the Secretary of Defense have not decided how

they plan to review the six draft implementation plans or how they intend

to use these plans to ensure DOD-wide improvements in the visibility of

items being shipped. In commenting on a draft of our February 2000 report,

these officials stated in January 2000 that they would develop DOD-wide

implementation plans to address our recommendations. Subsequently,

however, these officials stated that they intend for the six individual

implementation plans to constitute the Department's plan, and do not

intend to prepare a DOD-wide implementation plan. DOD has not
Page 12 GAO-01-30 Defense Inventory

established a date for finalizing the plans. The lack of a uniform, DOD-wide

implementation plan could continue the long-standing parochialism among

the military services and may hamper the implementation of Defense-wide

initiatives due to inconsistent application.

DOD Has Experienced

Delays in

Implementing Its 18

Proposed Actions

DOD's September 1999 plan included a total of 18 proposed actions, 8 of

which related to the control over end items and the remaining 10 related to

control over secondary items. Of these 18 proposed actions, 7 were

estimated to be complete by June 2000. While significant progress has been

made in implementing these actions, only one of these seven actions had

been implemented by June 2000. DOD has experienced delays in

implementing the other six actions and has revised the milestone

schedules.

The remaining 11 actions had completion dates that extended from fiscal

years 2001 through 2006 (without any identification of interim milestones)

or were ongoing with no specific completion date identified. DOD officials

explained that the original milestones were overly optimistic and that the

revised milestones in the six implementation plans are more realistic. A

summary of the 18 proposed actions is shown in table 2. The page

references in brackets refer to the page numbers in DOD's September 1999

plan where the actions, objectives, and completion dates are discussed.
Page 13 GAO-01-30 Defense Inventory

Table 2: Summary of DOD's 18 Actions Proposed in the Plan and Milestones

Source: DOD's in-transit visibility plan.

Officials in the Office of the Secretary of Defense have assigned

responsibility to each service, the Defense Logistics Agency, and the U.S.

Transportation Command for implementing the actions in DOD's

September 1999 plan. We reviewed the six implementation plans

individually to identify the status of each of the seven proposed actions

Actions related to end items:

1. The Army plans to improve inventory tracking with the development of the Global Combat Supply System (estimated completion

date−fourth quarter of fiscal year 2002). [page 2-7]

2. The Army plans to expand the use of advanced identification technology in its transportation systems (estimated completion

date−ongoing). [page 2-7]

3. The Army plans to continue improving its Logistics Intelligence File and Logistics Integrated Database (estimated completion

date−ongoing). [page 2-7]

4. The Navy will continue to monitor systems that provide end-item visibility (estimated completion date−ongoing). [page 2-7]

5. The Air Force is revising its Combat Ammunition System to maintain visibility of its inventory shipments (estimated completion

date−fiscal year 2006). [page 2-8]

6. The Marine Corps plans to continue deployment and enhancement of its Asset Tracking Logistics and Supply System (estimated

completion date−fourth quarter of fiscal year 2002). [page 2-8]

7. The Marine Corps plans to develop a messaging application programming interface that facilitates the exchange of data among the

inventory shipment systems that provide source data (estimated completion date−fourth quarter of fiscal year 2003). [page 2-8]

8. The Marine Corps plans to field a final Total Asset Visibility capability that includes an enhanced Logistics Bases Inventory Visibility

System (estimated completion date−fourth quarter of fiscal year 2004). [page 2-8]

Actions related to secondary items:

1. Provide timely and accurate delivery information (near term: estimated completion date−fourth quarter of fiscal year 1999; long term:

estimated completion date−ongoing initial module fielding in fiscal year 2001). [page 3-2]

2. Strengthen oversight of shipments directly from commercial suppliers to DOD activities (near term: estimated completion

date−fourth quarter of fiscal year 1999; short term: estimated completion date−third quarter of fiscal year 2000). [page 3-2]

3. Examine the adequacy of policy, procedures, and training related to shipment documentation, movement, and delivery, and revise as

necessary (estimated completion date−third quarter of fiscal year 2000). [page 3-3]

4. Complete and implement the DOD plan to integrate automatic identification technology into DOD logistics operations (estimated

completion date−fourth quarter of fiscal year 2002). [page 3-3]

5. Examine the adequacy of policy, procedures, and training for receipt notification processing and revise as necessary (estimated

completion date−third quarter of fiscal year 2000). [page 3-5]

6. Provide for policy and procedures that fully account for unserviceable items that have been received at a commercial repair site

(estimated completion date−third quarter of fiscal year 2000). [ page 3-5]

7. Implement the recommendations of the Joint Logistics Commanders' Material Management Group task force to revise the DOD

Disposal In-Transit Control System and enhance procedures and training (estimated completion date−ongoing; recommendations

due by second quarter of fiscal year 2000). [page 3-5]

8. Measure the time to record a receipt and make it visible to all requiring activities, including DOD financial and accounting systems

(estimated completion date−fourth quarter of fiscal year 2001). [page 3-6]

9. Bring DOD management information systems associated with shipment control into compliance with the Chief Financial Officers Act

(estimated completion date−fiscal year 2005). [page 3-6]

10. Improve current discrepancy reporting and investigating for shipments between DOD and commercial locations (near-term

estimated completion dates−third quarter of fiscal year 2000; short-term completion date−first quarter of fiscal year 2001). [page 3-7]
Page 14 GAO-01-30 Defense Inventory

originally scheduled to be completed by June 2000. Table 3 shows the

revised completion dates identified in the draft implementation plans for

the seven proposed actions originally scheduled to be completed by June

2000. These revised completion dates identify the date when all of the

services, the Defense Logistics Agency, and the U.S. Transportation

Command expect to complete their work related to each action. According

to DOD officials, substantial progress has been made in implementing

these actions, and some of the services and commands will complete their

work prior to the revised completion dates shown in table 3.

Table 3: Status of Seven Actions Originally Estimated to Be Completed by June 2000

Source: GAO analysis.

The details regarding the specific steps initiated by the military services,

the Defense Logistics Agency, and the U.S. Transportation Command for

implementing DOD's plan to improve the management of shipped inventory

for the seven actions originally estimated to be complete by June 2000 are

outlined in appendix I. As shown in table 3, DOD has completed only one of

these seven actions by June 2000. Specifically, the Joint Logistics

Commanders, Material Management Group task force developed its

recommendations to revise the DOD Disposal In-Transit Control System

and enhance procedures and training by the June 2000 completion date.

Implementation of the recommendations is ongoing. The completion dates

for the other six actions have been revised to extend beyond June 2000. For

Action item

DOD's estimated

completion date

Revised date of

completion

1. Provide timely and accurate delivery information. September 1999 October 2000

2. Strengthen oversight of shipments directly from commercial to DOD activities. June 2000 September 2002

3. Examine the adequacy of policy, procedures, and training related to shipment

documentation, movement, and delivery.

June 2000 March 2001

5. Examine the adequacy of policy, procedures, and training for receipt notification

processing.

June 2000 March 2001

6. Provide for policy and procedures that fully account for unserviceable items

received at commercial repair sites.

June 2000 December 2000

7. Implement the Joint Logistics Commanders Material Management Group task

force recommendations to revise the DOD Disposal In-Transit Control System and

enhance procedures and training.

Recommendations due by

March 2000.

Implement Task Force

recommendations−ongoing.

June 2000

Ongoing

10. Improve current discrepancy reporting and investigating for shipments between

DOD and commercial locations.

June 2000 December 2001
Page 15 GAO-01-30 Defense Inventory

example, DOD's plan indicated that the U.S. Transportation Command

would obtain electronic data interchange messages from 35 carriers by

September 1999 for integration with the Global Transportation Network.

However, the U.S. Transportation Command's implementation plan shows

that only 31 of these carriers will be using electronic data interchange by

December 2000.

For the remaining 11 actions, the Department stated in its September 1999

plan that 7 of these actions would be complete in fiscal years 2001 through

2006. The other 4 of these 11 actions are ongoing, with no specific

completion date provided. We found, however, that the six implementation

plans indicate that these original completion dates will not be met. For

example, the Army has encountered delays in developing the

Transportation Coordinator Automated Information for Movement System

II. This system is intended to provide automation support to warfighters

during deployment, sustainment, and redeployment operations, and to

provide source data to strategic command and control systems to increase

the visibility of in-transit personnel and items during those operations. The

Army does not expect to complete the fielding of this system until

September 2007. In addition, system fielding could be further delayed

because of a reported critical $22.7 million unfunded software

development requirement.

Conclusions The six draft implementation plans prepared by the four military services,

the Defense Logistics Agency, and the U.S. Transportation Command are

generally responsive to the findings and recommendations in our February

2000 report regarding DOD's plan to improve the visibility over inventory

being shipped. These plans, however, do not contain detailed performance

measures to ensure effective implementation and do not reflect a

coordinated DOD-wide approach. We are aware that the Office of the

Secretary of Defense will be reviewing these draft plans and that additional

changes and revisions are expected. The success of these plans will depend

largely on the extent to which the corrective actions are implemented

consistently throughout the Department. We are concerned that the lack of

a uniform, DOD-wide implementation plan will continue the long-standing

parochialism within the military services regarding their policies and

procedures for managing inventory. The Department's strategy to have

each service, the Defense Logistics Agency, and the U.S. Transportation

Command prepare and implement their own implementation plans without

preparing a uniform DOD-wide implementation plan may also lead to
Page 16 GAO-01-30 Defense Inventory

inadequate oversight and inconsistent application of Defense-wide

initiatives.

DOD has experienced delays in implementing the corrective actions

outlined in the Department's September 1999 plan. Of the original 18

corrective actions contained in the September 1999 plan, 7 were expected

to be completed by June 2000. More recent information from the draft

implementation plans, however, indicates that only one of these actions

will be completed as scheduled.

Recommendations for

Executive Action

To achieve DOD-wide improvements in the Department's control over

inventory shipments, we recommend that the Secretary of Defense direct

the Under Secretary of Defense for Acquisition and Technology to take the

following actions:

• Complete the review of the six draft implementation plans prepared by

the four services, the Defense Logistics Agency, and the U.S.

Transportation Command so that these plans can be finalized.

• Require that these plans (1) contain detailed performance measures to

allow the services and commands to assess the effectiveness of the

corrective actions and (2) represent a coordinated and uniform

DOD-wide approach to correcting the long-standing lack of visibility

over inventory being shipped.

• Require that, for those corrective actions that involve more than one

service or command, the implementation plans include appropriate

coordination procedures, specifically addressing the role of each service

or command as it relates to implementing each corrective action.

• Prepare a DOD-wide implementation plan to identify how the Office of

the Secretary of Defense will (1) verify consistent implementation of the

corrective actions throughout the Department and (2) oversee the

implementation of the individual actions proposed by the services, the

Defense Logistics Agency, and the U.S. Transportation Command.

Agency Comments and

Our Evaluation

We received written comments from the Department of Defense, which are

reprinted in appendix II. The Department agreed with the underlying

message of our report that visibility over items being shipped must be

improved. The Department further stated in its comments that it will

ensure that the actions in the plans are completed and that DOD

components are working together toward a common goal of visibility over
Page 17 GAO-01-30 Defense Inventory

these assets. DOD agreed with our recommendation that the

implementation plans should include appropriate coordination procedures

for actions involving more than one service or command. However, DOD

did not fully agree with our remaining three recommendations related to

the Office of the Secretary of Defense's role in finalizing the plans and

monitoring their implementation. Our specific comments regarding DOD's

response to these three recommendations are discussed below.

DOD agreed with our recommendation that the Department review the six

draft implementation plans, but did not agree that the Department should

be responsible for finalizing these plans. DOD believes that this

responsibility should rest with the appropriate services and commands. We

agree that it would be more appropriate for the services and commands to

finalize these plans, and have modified our recommendation accordingly.

DOD agreed with our recommendation that the implementation plans

should contain detailed performance measures to ensure successful

completion, but did not agree that the Office of the Secretary of Defense

should assess the effectiveness of the corrective actions in relation to these

measures. DOD stated that the Department will measure the effectiveness

of the six implementation plans through the metrics outlined in DOD's

Logistics Strategic Plan, but that the development and monitoring of more

detailed performance measures in the individual implementation plans

should be the responsibility of the appropriate services and commands. We

agree that each service and command should be responsible for measuring

the effectiveness of the corrective actions in their individual plans and have

modified our recommendation accordingly.

DOD agreed with our recommendation that the Department oversee the

implementation of the individual corrective actions to ensure consistency,

but stated that it is not feasible to prepare a DOD-wide plan to identify how

they will monitor the successful implementation of the individual plans.

The intent of our recommendation was that DOD develop a more

formalized management framework to specifically define how the

Department will oversee the completion of the individual plans and

monitor their implementation. Therefore, we believe that such a DOD-wide

plan is feasible and necessary. This plan should include a formal approach

outlining the specific steps, milestones, and measurements DOD will use to

ensure that the goal of visibility over items being shipped is achieved and

that the services and commands are working together toward this goal.
Page 18 GAO-01-30 Defense Inventory

Scope and

Methodology

Our analysis of DOD's implementation of its September 1999 plan to

improve the visibility over items being shipped was based on the

requirements of section 349 of the Strom Thurmond National Defense

Authorization Act for Fiscal Year 1999 (P.L. 105-261), information contained

in the implementation plans, discussions with DOD officials, and our prior

work regarding DOD's control over its inventory shipments. Specifically, to

ascertain the extent to which the implementation plans address the

requirements in the statute and the recommendations in our February 2000

report, we compared the plans to each of the key requirements set forth in

the statute and to the findings and recommendations in our report.

To determine whether the plans contain an appropriate management

framework for implementation, we used the requirements of the

Government Performance and Results Act, commonly referred to as the

Results Act. This act offers a model for developing an effective

management framework to improve the likelihood of successfully

implementing initiatives and assessing results. Although section 349 did not

require that DOD's plan conform to the Results Act, congressional reports

and administrative guidance regarding the Results Act indicate that

activities such as inventory management should be subject to these

results-oriented principles.

To determine the status of the 18 actions DOD identified in its September

1999 plan, we reviewed the six draft implementation plans prepared by the

services, the Defense Logistics Agency, and the U.S. Transportation

Command. From these draft plans, we identified the dates that the services

and commands expect to complete each of the 18 actions.

We conducted our review from May 2000 through October 2000 in

accordance with generally accepted government auditing standards.

We are sending copies of this report to the appropriate congressional

committees; the Honorable William Cohen, Secretary of Defense; the

Honorable Louis Caldera, Secretary of the Army; the Honorable Richard

Danzig, Secretary of the Navy; the Honorable F. Whitten Peters, Secretary

of the Air Force; General James L. Jones, Commandant of the Marine

Corps; Lieutenant General Henry T. Glisson, Director, Defense Logistics

Agency; General Charles T. Robertson, Jr., Commander in Chief, U.S.

Transportation Command; and the Honorable Jacob Lew, Director, Office

of Management and Budget.
Page 19 GAO-01-30 Defense Inventory

If you or your staff have any questions regarding this report, please contact

me at (202) 512-8412. GAO contacts and key contributors to this report

were listed in appendix III.

David R. Warren, Director

Defense Capabilities and Management
Page 20 GAO-01-30 Defense Inventory

List of Congressional Committees

The Honorable John Warner

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Floyd Spence

Chairman

The Honorable Ike Skelton

Ranking Minority Member

Committee on Armed Services

House of Representatives

The Honorable Ted Stevens

Chairman

The Honorable Daniel Inouye

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable Jerry Lewis

Chairman

The Honorable John Murtha

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Page 21 GAO-01-30 Defense Inventory
Page 22 GAO-01-30 Defense Inventory

Appendix I

Status of DOD's Actions Regarding Secondary Apendxies

Items ApendxiI

This appendix provides the status of 7 of DOD's 18 proposed actions to

address the lack of control over secondary items being shipped (e.g., spare

parts, clothing, and medical supplies). These seven actions were scheduled

for completion by June 2000.

DOD's actions for secondary items are detailed in its plan by the following

problem areas specified in the statute:

• the loss of oversight of secondary items, including any loss of oversight

when items are being transported by commercial carriers;

• the loss of accountability for secondary items due to either a delay of

delivery of the items or a lack of notification of a delivery of the items;

and

• the vulnerability of secondary items to loss through fraud, waste, and

abuse.

The action item numbers and page references in brackets correspond to

DOD's September 1999 plan where the seven actions and objectives are

discussed. Table 2 of this report provides a detailed listing of DOD's 18

proposed actions.

Loss of Oversight for

Secondary Items

Action 1: Provide timely and accurate delivery information by the following

times:

• Near term: obtain carrier electronic data interchange messages.

[page 3-2]

Objectives:

• For the near-term action, the goal is for 28 air, motor, and rail carriers

and 7 ocean carriers to submit electronic data interchange status

messages (estimated completion date—fourth quarter of fiscal year

1999). [page 3-2]

GAO Analysis:

The U.S. Transportation Command is incorporating commercial electronic

data interchange information into the Global Transportation Network

System to provide the status of DOD material. In return, the system's

operator is entering into data exchange agreements with commercial

carriers transporting DOD material. Significant progress has been made to
Appendix I

Status of DOD's Actions Regarding

Secondary Items

Page 23 GAO-01-30 Defense Inventory

obtain positive receipt confirmation for the 35 carriers scheduled to use

Electronic Data Interchange information. Of these, 27 carriers are using

Electronic Data Interchange status messages for integration with the

Global Transportation Network. The U.S. Transportation Command plans

to have four more carriers integrated with the Global Transportation

Network by September 2000.

The Army has encountered delays in the development of the Transportation

Coordinator Automated Information for Movement System II (TC-AIMS II).

This system is intended to provide automation support to warfighters

during deployment, sustainment, and redeployment operations, and to

provide source data to strategic command and control systems to increase

the visibility of in-transit personnel and items during those operations.

Authority to begin initial fielding of the unit movement portion of the

TC-AIMS II system is scheduled for October 2000. Fielding of the TC-AIMS

II system is now expected to be completed by September 2007. A critical

$22.7 million unfunded software requirement exists that could further

delay the completion of this project.

Action 2: Strengthen oversight of shipments directly from commercial

suppliers to DOD activities by

• developing a vendor in-transit implementation plan that identifies

schedules and milestones for fielding in-transit techniques for vendors

that perform direct deliveries (estimated completion—fourth quarter of

fiscal year 1999) and

• completing the direct vendor delivery pilot with a DOD pharmaceutical

vendor to provide the Global Transportation Network information via

electronic data interchange (estimated completion—third quarter of

fiscal year 2000). [page 3-2]

Objective:

• Ensure visibility of direct shipments from commercial sources to DOD

consignees, including items in-transit to and from contractor repair

facilities. [page 3-3]

GAO Analysis:

The U.S. Transportation Command performed an initial assessment of size

and expected growth of direct vendor delivery shipments in fiscal year

1999. Based on the results of this assessment, vendor in-transit
Appendix I

Status of DOD's Actions Regarding

Secondary Items

Page 24 GAO-01-30 Defense Inventory

implementation plans are being developed. However, a comprehensive

implementation plan, including schedules and milestones, will not be

developed until September 2002 instead of June 2000, as originally

scheduled. This delay resulted from the fact that the original assessment

highlighted the need to expand the medical prototype efforts to subsistence

and repair parts.

Additionally, in October 1998, the U.S. Transportation Command initiated a

direct vendor delivery prototype with a pharmaceutical vendor to provide

the Global Transportation Network with Electronic Data Interchange

information. The operational testing phase of this program was completed

in June 2000. The Defense Logistics Agency partnered with the

Transportation Command to expand the pharmaceutical pilot to a medical

and subsistence prototype and a repair parts prototype. The medical and

subsistence prototype is expected to be complete in June 2001, and the

repair parts prototype in December 2001.

Action 3: Examine the adequacy of policy, procedures, and training related

to shipment documentation, movement, and delivery and revise as

necessary (estimated completion date—third quarter of fiscal year 2000).

[page 3-3]

Objectives:

• Ensure that shippers, carriers, and consignees are in full compliance

with policy and procedures related to shipment documentation,

movement, and delivery. [page 3-3]

• Ensure timely and accurate information from shippers, carriers, and

consignees. [page 3-3]

GAO Analysis:

The U.S. Transportation Command submitted changes addressing roles and

responsibilities for 5 of 15 identified joint publications regarding adequacy

of policies and procedures, as of March 2000. Also, the U.S. Transportation

Command has initiated an action to merge the Military Standard

Transportation and Movement Procedures into the Defense Transportation

Regulation. They expect to complete this action by September 2000.

The Defense Logistics Agency states that no further action is required

because its Defense Distribution Center conducts on-going site visits at the

depots, carriers' terminals, and customer sites to ensure policies,
Appendix I

Status of DOD's Actions Regarding

Secondary Items

Page 25 GAO-01-30 Defense Inventory

regulations and automated technologies are adequate, as well as to review

summary level Supply Discrepancy Report analyses.

The Army has initiated actions to improve compliance with existing

policies. In addition, a major review of logistics policy to ensure that

logistic policy supports the logistics system modernization efforts is

scheduled to be completed by November 2001. In the interim, the Army

created a task force in July 2000 to review the Army Material Returns

process and policy. In addition, action is under way to provide the

Recovery Improvement Program Reporting System as a web-based product

to improve compliance with policy by December 2000.

The Air Force Audit Agency plans to complete a series of management

advisory services by March 2001 to assess transportation policies and

procedures for receiving material, reporting transportation discrepancies,

and complying with shipment delivery acknowledgment procedures. The

Air Force also plans to evaluate existing training and documentation by

March 2001.

In a joint effort, the Navy and the Defense Logistics Agency conducted a

baseline process review in February 1999 and identified numerous problem

areas and weaknesses in the current system. Instances where policy and

procedures were not being followed or clearly understood were

documented, and 30-plus action items were assigned. As a result, an

In-Transit Process Team was established in October 1999 to reengineer

business processes. Also an agreement was made between Navy and the

Defense Logistics Agency to meet regularly and monitor progress. This

includes efforts to cross train Navy and Defense Logistics Agency

personnel on unique processes and procedures.

The Marine Corps believes its current procedures are adequate. However, it

plans to deploy the Product Data Reporting and Evaluation Program

information system to automate manual procedures by September 2000.

Loss of Accountability for

Secondary Items

Action 5: Examine the adequacy of policy, procedures, and training for

receipt notification processing and revise as necessary (estimated

completion date—third quarter of fiscal year 2000). [page 3-5]
Appendix I

Status of DOD's Actions Regarding

Secondary Items

Page 26 GAO-01-30 Defense Inventory

Objectives:

• Ensure that consignees are in full compliance with receipt

acknowledgment policies and procedures. [page 3-5]

• Reconcile system and system interface problems that deter receipt

acknowledgment. [page 3-5]

• Ensure proper financial accountability of receipts. [page 3-5]

GAO Analysis:

The U.S. Transportation Command has no direct role in the supply receipt

notification process. However, by September 2000 it plans to review the

quality of the various Global Transportation Network source data systems,

including electronic data interchange, that report transportation delivery

information.

The Defense Logistics Agency is currently working through the Defense

Logistics Management System Supply Process Review Committee to

ensure actual quantity received is reported and that the military service

integrated material manager generates a material receipt

acknowledgement upon receipt notification. This action was originally

estimated to be completed by June 2000. However, according to the latest

estimate in the Defense Logistics Agency's plan, this action will not be

complete until September 2000.

The Defense Distribution Center conducted an in-depth review of the

Defense Logistics Agency receiving process in fiscal year 1999 and found

distribution depots are performing proper actions associated with material

receipt.

The Army has taken steps toward implementing this action, but did not

meet the June 2000 deadline. The Army created a task force in July 2000 to

review the Army material returns process and policy. In addition, the Army

plans to (1) prepare a system Engineering Change Proposal to implement

the DOD standard pseudo receipt process in the Army Retail Systems by

September 2000 and (2) provide a web-based Army Recovery Improvement

Program Reporting System by December 2000.

The Air Force will not meet DOD's original estimated completion date of

June 2000, and it has provided revised milestone dates based on the work

being done by the Air Force Audit Agency. The Air Force Audit Agency has

been tasked to perform a series of management advisory services to assess
Appendix I

Status of DOD's Actions Regarding

Secondary Items

Page 27 GAO-01-30 Defense Inventory

the adequacy of transportation and supply policies and procedures for

acknowledging material receipts and the adequacy of existing training and

documentation by March 2001. Also, the Air Force is in the process of

implementing recommendations resulting from the review of wholesale

receipt processing at Defense Logistics Agency distribution depots

collocated with Air Logistics Centers. The estimated completion date is to

be determined.

The Navy has examined its policies and procedures, but training for the

reengineered receipt notification process was not completed by June 2000.

The Navy conducted a 1-month joint baseline process review with the

Defense Logistics Agency during February and March 1999. Numerous

problem areas and weaknesses were identified in the current system.

Policy and procedural weaknesses were also identified. Instances where

policy and procedures were not being followed or clearly understood were

documented and 30-plus action items assigned. As a result, an In-Transit

Process Team was formed in August 1999 and detailed business rules were

established. In January 2000, a reengineered system design team was

formed to develop software to implement the reengineered process.

Training and implementation of the reengineered process is scheduled for

October 2000.

There is no evidence that the Marine Corps has examined the adequacy of

its policy, procedures, and training for receipt notification. The Marine

Corps states that its existing policy is to trace lost shipments of material

and to take every necessary action to trace a lost shipment. However, the

other stated actions in the Marine Corps' plan are not directly related to

examining the adequacy of its policy, procedures, and training for receipt

notification processing. For example, the Marine Corps is working jointly

with Air Force and Navy program managers to analyze the compliance

requirements in the Chief Financial Officers Act to be able to show full

accountability of logistics actions (receipt, issue, inventory, and disposal)

for material. However, bringing management information systems into

compliance with the Chief Financial Officers Act is a separate long-term

action in the DOD plan. The Marine Corps plan also states it is working on

fielding the Commercial Asset Visibility II system; however, this system is

meant to track assets moving to and from commercial repair facilities and

does not properly address this action.

Action 6: Provide for policy and procedures that fully account for

unserviceable items that have been received at a commercial repair site

(estimated completion date—third quarter of fiscal year 2000). [page 3-5]
Appendix I

Status of DOD's Actions Regarding

Secondary Items

Page 28 GAO-01-30 Defense Inventory

Objective:

• Maintain proper accountability of unserviceable assets shipped to

commercial facilities for repair. [page 3-5]

GAO Analysis:

The actions the Army is taking to address this item will not be completed

by the scheduled June 2000 date. The Army plans to deploy the Commercial

Asset Visibility System II to account for and track shipments of material by

September 2000. In its plan, the Army states that the deployment of this

system will provide improvements for receipt, issue, induction into the

repair process, and inventory control for reparable items being processed.

This system will also eliminate a weakness that occurs when commercial

repair activities are not required to report receipts or are unable to report

in a timely manner. However, it is still unclear how the Army plans to

provide policy and procedures to ensure accountability.

The Air Force is currently evaluating approved regulation changes that

govern accountability during movement of material to repair activities. The

Air Force is working with a Joint Group on Material Management to resolve

the visibility and reporting of material repaired under depot maintenance

inter-service agreements. Further, the Air Force reported that their

commercial repair tracking process is undergoing modernization, which

should be completed by December 2001. The modernized system will

include subsidiary ledger and system interfaces to appropriately account

for in-transit assets repaired at commercial activities and is expected to be

compliant with the Chief Financial Officers Act.

The Navy expects to complete its ongoing actions in December 2000. This

is 6 months past the scheduled DOD due date. According to the Navy's

plan, a program was implemented in October 1999 to enhance shipped

material visibility and tracking from commercial activities. Also, an

In-transit Process Team has been established to reengineer the inventory

management process to improve control of shipped items.

The Marine Corps plan does not outline any specific revisions to its policies

and procedures for unserviceable items shipped to commercial repair

facilities. In its plan, the Marine Corps' states that it will modify its systems

for tracking shipments of unserviceable items to and from the depot. These

modifications, however, will not meet the June 2000 deadline stated in

DOD's plan. The Marine Corps uses interim programs to track shipments of
Appendix I

Status of DOD's Actions Regarding

Secondary Items

Page 29 GAO-01-30 Defense Inventory

unserviceable items to and from commercial depots until a direct link to

the Global Transportation Network can be established. Once the Asset

Tracking Logistics and Supply System, Version II+, is fielded the Marine

Corps expects to have visibility of unserviceable items being shipped. The

initial deployment of this system is scheduled for September 2000.

Action 7: Implement the recommendations of the Joint Logistics

Commanders' Material Management Group task force to revise the DOD

Disposal In-Transit Control System and enhance associated procedures and

training (estimated completion—ongoing; recommendations due by

second quarter of fiscal year 2000). [page 3-5]

Objectives:

• Ensure visibility of items shipped to disposal. [page 3-5]

• Ensure the proper documentation of shipments of controlled items to

disposal. [page 3-5]

GAO Analysis:

The Defense Logistics Agency had the lead responsibility for implementing

this action. The recommendations of the Joint Logistics Commander's

Material Management Group task force were completed in June 2000, and

are currently being implemented through DOD. The Defense Logistics

Agency developed a proposed military regulation change to improve

procedures to prevent invalid records and identify follow-up transactions.

The Defense Logistics Service Center and the Army Logistics Management

College also created a new web-site to provide training on the key

management information system for excess property moving to disposal.

This site is also expected to assist in scheduling training. These actions

were completed in June 2000. DLA is planning further actions to modify the

validation criteria and review the impact of these changes on disposal

shipment transactions.

The U.S. Transportation Command notes that this action does not apply

because this command is not directly involved in the disposal process.

The Army has no direct role for this action because it is not the office of

primary responsibility. However, it plans to review its policies for

compliance with Defense Logistics Agency programmed changes by

October 2000.
Appendix I

Status of DOD's Actions Regarding

Secondary Items

Page 30 GAO-01-30 Defense Inventory

The Air Force has no direct role for this action because it is not the office

of primary responsibility. The Air Force is currently evaluating the need for

further training and has concurred with a proposed DOD regulation

change. After this change is approved through the Department, the Air

Force plans to take action to determine the cost and schedule for

developing and fielding related retail software changes.

The Navy's plan states that although this action item is being initiated by

the Defense Logistics Agency, it directed its commands in March 2000 to

review the procedures for sending material disposal and conduct related

training in an effort to improve the Navy's disposal program.

The Marine Corps plan does not address any specific actions for addressing

the overall action item because the Defense Logistics Agency has primary

responsibility.

Vulnerability of Secondary

Items to Loss Through

Fraud, Waste, and Abuse

Action 10: Improve current in-transit discrepancy reporting and

investigating for shipments between DOD locations and between

commercial and DOD locations. [page 3-7]

• Examine the effectiveness and efficiency of current procedures and

systems for discrepancy reporting and make necessary changes.

(estimated completion date − third quarter of fiscal year 2000).

[page 3-7]

Objective:

• Ensure that discrepancies in item, quantity, and location are reported

and investigated in accordance with established policies and

procedures. [page 3-8]

GAO Analysis:

The U.S. Transportation Command established a joint service work group

in November 1998 to examine transportation discrepancy reporting

processes. This work group conducted a comprehensive review that

resulted in 45 recommendations for changes to transportation discrepancy

reporting procedures. Of these, seven were completed in fiscal year 1999.

An additional 13 actions were under way as of March 2000, and other

ongoing actions have expected completion dates through fiscal year 2001.

Also, an on-line discrepancy report capability, including a training module,
Appendix I

Status of DOD's Actions Regarding

Secondary Items

Page 31 GAO-01-30 Defense Inventory

was implemented in fiscal year 1999. The U.S. Transportation Command

expects to complete the enhancements to the discrepancy monitoring

program by August 2000.

The Defense Logistics Agency Defense Distribution Center has developed a

Research and Processing Guide to assist depots in researching, analyzing,

and responding to customer shipment discrepancy reports. The Defense

Logistics Agency is implementing several initiatives to improve current

discrepancy reporting and investigation.

The Army has an ongoing program with the Defense Logistics Agency to

measure all segments of the material-receiving program. Also, the Army

plans to improve its reporting by standardizing and extending its Electronic

Tracking Program. The Army expects to develop and program resources to

support this expansion by October 2000.

The Air Force Audit Agency recently completed a review of its policy and

procedures in reporting supply discrepancies. As a result, the Air Force

plans to modify its regulations by December 2001 to correct

inconsistencies. Also, a training package is being developed for

incorporation into supply and transportation entry-level courses for all

major commands and retail activities.

The Navy will not meet DOD's estimated June 2000 completion date.

According to the Navy's plan, this action will be completed by November

2000. To address this action, the Navy is working jointly with the Defense

Logistics Management Support Office to develop interfaces between

existing and future supply discrepancy reporting systems. As a result,

short-term fixes to existing systems were identified in March and April 1999

to improve automation and visibility. The Navy implemented changes to

improve the interface between their in-transit tracking and discrepancy

follow-up systems in November 1999. As part of the Navy's reengineered

process to be implemented by November 2000, the Navy is developing a

web-based Supply Discrepancy Reporting system which will provide users

the on-line capability to enter discrepancy data, pass this data to other

activities, and return resolution information to the initiator of the supply

discrepancy report. The Navy identified, however, that extracting the

transportation information has been more difficult than expected, and

stated that it may not be possible to effectively generate the percent of

transportation discrepancies resolved until further system planning is

conducted.
Appendix I

Status of DOD's Actions Regarding

Secondary Items

Page 32 GAO-01-30 Defense Inventory

According to the Marine Corps' plan, the Marine Corps' Product Data

Reporting and Evaluation Program was scheduled for fielding in June 2000.

This program is an automated information system designed to automate

the manual process of ordering, screening, and investigating discrepancies.
Page 33 GAO-01-30 Defense Inventory

Appendix II

Comments From the Department of Defense ApendxiI

Note: GAO comment

supplementing those in the

report text appear at the

end of this appendix.
Appendix II

Comments From the Department of Defense

Page 34 GAO-01-30 Defense Inventory

See comment 1.
Appendix II

Comments From the Department of Defense

Page 35 GAO-01-30 Defense Inventory
Appendix II

Comments From the Department of Defense

Page 36 GAO-01-30 Defense Inventory

The following is GAO's comment on DOD's letter dated October 11, 2000.

GAO Comment 1. During our review, Department of Defense officials insisted that we

treat the six implementation plans as drafts and refer to them in our

report as such. Therefore, we refer to these plans as drafts throughout

the report. In its comments, the Department states that, while the plans

are living documents as opposed to drafts, it agrees that the services

and commands need to complete the plans.
Page 37 GAO-01-30 Defense Inventory

Appendix III

GAO Contacts and Staff Acknowledgments ApendxiI

GAO Contacts Charles I. Patton, Jr. (202) 512-4412

Lawson Gist, Jr. (202) 512-4478

Acknowledgments In addition to the above contacts, David Schmitt, Patricia Blowe, Lauren

Johnson, and Susan Woodward made key contributions to this report.
Page 38 GAO-01-30 Defense Inventory

Related GAO Products

Defense Inventory: Army Needs to Strengthen and Follow Procedures to

Control Shipped Items (GAO/NSIAD-00-109, June 23, 2000).

Inventory Management: Better Controls Needed to Prevent Misuse of

Excess DOD Property (GAO/OSI/NSIAD-00-147, Apr. 28, 2000).

Department of the Navy: Breakdown of In-Transit Inventory Process

Leaves It Vulnerable to Fraud (GAO/OSI/NSIAD-00-61, Feb. 2, 2000).

Defense Inventory: Plan to Improve Management of Shipped Inventory

Should Be Strengthened (GAO/NSIAD-00-39, Feb. 22, 2000).

Defense Inventory: Inadequate Compliance With Controls for Excess

Firearms and Other Sensitive Items (GAO/NSIAD-00-27, Nov. 29, 1999).

Defense Inventory: Property Being Shipped to Disposal Is Not Properly

Controlled (GAO/NSIAD-99-84, July 1, 1999).

DOD Financial Management: More Reliable Information Key to Assuring

Accountability and Managing Defense Operations More Efficiently

(GAO/T-AIMD/NSIAD-99-145, Apr. 14, 1999).

Defense Inventory: Navy Procedures for Controlling In-Transit Items Are

Not Being Followed (GAO/NSIAD-99-61, Mar. 31, 1999).

Performance and Accountability Series: Major Management Challenges and

Program Risks—Department of Defense (GAO/OCG-99-4, Jan. 1999).

High-Risk Series: An Update (GAO/HR-99-1, Jan. 1999).

Department of Defense: Financial Audits Highlight Continuing Challenges

to Correct Serious Financial Management Problems

(GAO/T-AIMD/NSIAD-98-158, Apr. 16, 1998).

Department of Defense: In-Transit Inventory (GAO/NSIAD-98-80R, Feb. 27,

1998).

Inventory Management: Vulnerability of Sensitive Defense Material to Theft

(GAO/NSIAD-97-175, Sept. 19, 1997).

Defense Inventory Management: Problems, Progress, and Additional

Actions Needed (T-NSIAD-97-109, Mar. 20, 1997).
Related GAO Products

Page 39 GAO-01-30 Defense Inventory

High-Risk Series: Defense Inventory Management (GAO/HR-97-5,

Feb. 1997).

High-Risk Series: Defense Financial Management (GAO/HR-97-3,

Feb. 1997).

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